Aeronautical Revenues Research Articles

The impact of non-aeronautical revenues on airport performance at Julius Nyerere International Airport in Dar Es Salaam, Tanzania

The study analyzed the impact of non-aeronautical revenues on airport performance at Julius Nyerere International Airport in Dar es salaam, Tanzania. The study used longitudinal design in which time series data from financial statements and integrated reports for the financial years 2017/18 to 2020/21 was undertaken. The Multiple linear regression models were employed in analyzing the contribution of non- aeronautical revenues on improving the airport facilities. Findings of the study demonstrated that, i) rental fees and car parking charges impacted positively the improvement of the airport facilities, ii) advertisement also positive and significantly contributed on the improvement of the airport facilities at Julius Nyerere International Airport. This implies that, JNIA can further increase its total revenues by expanding the scope of retail operations at the airports under its jurisdiction as additional sources of income. It is recommended that airport managements and other stakeholders responsible for airports’ infrastructure and transport to expand more use of NARVs sources so as to improve the service delivery for their passengers and gain more revenues for future financial stability.

Possibilities and prospects for airport revenue recovery by applying international strategies of economic development

The global air transportation market has tremendously changed over the past three years. Worldwide quarantine restrictions complicated the process of aeronautical communication both at the domestic and international levels. Lockdown resulted in a sharp decrease in the volume of world passenger traffic - a vital source of airport revenues. This article studied global airport revenues and classified airport services by type and revenues according to the sources of their receipt. The structure of aeronautical and non-aeronautical revenues was given, and the most common airport charges were characterized. The state and forecasts of world passenger air transportation volume during 2015-2025 and the impact of the COVID-19 pandemic on them were studied in this article. In particular, the way it redistributed shares of non-aeronautical revenues with an increase in the share of rental revenues. Attention to the impact of a full-scale Russian invasion of Ukraine on the global aviation industry was paid. The current forecasts for the recovery of the global air transportation market were studied. Analysis of the current state of aeronautical and non-aeronautical airport revenues allowed to identify possible strategies for increasing their volume under post-pandemic aeronautical market recovery conditions. Among the possible measures for airports, the following were highlighted: implementation of dynamic pricing based on demand and airport workload, using the diversification strategy for organizing income sources with a focus on non-aeronautical services and air cargo transportation. The importance of greening economic activity in the long term was noted to ensure the investment attraction of airports.

THE CONNECTION BETWEEN AN AIRPORT TYPE AND REVENUE STRUCTURE AT BALTIC STATES AIRPORTS

Airports are not only engines of transportation of passengers and cargo, but also commercial enterprises offering services far beyond transportation, which is why their revenues are formed by both aeronautical and non-aeronautical sales. Aeronautical revenues of some large European airports are higher than non-aeronautical revenues, whereas some regional and secondary European airports demonstrate the opposite trend. The aim of this research was to determine if there is a connection between an airport type and the ratio of aeronautical and non-aeronautical revenues at Baltic States airports in way that is consistent with the previous research. The aim was attained in three stages. The first, the definitions of the main and secondary airports were constructed via discourse analysis. The second, the structure of airport revenues of the selected Baltic States airports was analysed. The third, conclusions were made regarding a connection between an airport type and the revenue structure of these Baltic States airports. On the one hand, the research results suggested there might be a connection between an airport type and the revenue structure although this question requires further research, and on the other hand, the financial analysis showed that airports with a higher share of non-aeronautical revenues than aeronautical revenues were more resilient to crises.

THE IMPACT OF COVID-19 PANDEMIC ON THE FUTURE AIRPORT PASSENGER TERMINALS DESIGN

The COVID-19 pandemic has had a huge influence on air transport. For the first time two thirds of the global aircraft fleet were grounded;airports recorded a decrease of 70-95% in passenger traffic, and many airlines went bankrupt. The negative trends of air traffic operations automatically decrease airport aeronautical and non-aeronautical revenues, bringing airports to the very bottom level of financial survival. However, after several months and after implementing the World Health Organization anti-COVID-19 measures, a small positive trend starts to be seen. The measures that need to be implemented have presented an additional problem for passenger terminal planning and design, especially if the introduction of new subsystems into the existing traffic flow, such as health control, is taken into account. Considering that current international recommendations from IATA ADRM are no longer valid, it is necessary to redefine the traffic flows inside the terminal and adjust the procedures of passengers and baggage handling to the new conditions of social distancing. Following that, ICAO Annex 9 recommendation that passengers need to be processed on departure traffic flow in 60 minutes went under question. New requirements for terminal space to keep passengers on safe distance, the implementation of new contactless technology for quick passenger processing, a thermal camera and health checkpoints, as well as other measures are now “new normal” for the airport business.

Airport Competitive Strengths in Turkey: Primary, Secondary, and Regional Airports

Airport commercialization have great impact on airport management. While non-aeronautical revenues have gain importance as well as aeronautical revenues, airport management perspective are changed dramatically. This paper aims to determine airport competitive advantages in Turkey, and  analytic network process method is used to analyse competitive strengths of airports. Airport categorized as primary, secondary, and regional. Results shows that facility factors are the most important strength for primary airports. While demand factors are the most important strength for secondary airports, service factors are the most one for regional airports.

An early assessment of the impact of COVID-19 on air transport: Just another crisis or the end of aviation as we know it?

Along with other sectors of the economy, air traffic is vulnerable to external factors, such as oil crises, natural disasters, armed conflicts, terrorist attacks, economic recessions and disease outbreaks. These outside influences seem to have a more severe and more rapid impact on air traffic numbers as sudden increases in flight cancellations, aircraft groundings, travel bans and border closures are quickly felt in lower load factors and yields for airlines, while airports lose non- aeronautical revenues (Voltes-Dorta and Pagliari, 2012). Before Covid-19, the most important disease outbreak in terms of impact on air traffic was SARS in 2003. According to IATA (IATA, 2020a), in May 2003, at the height of the SARS outbreak, monthly revenue passenger kilometres (RPKs) of Asia-Pacific airlines were 35% lower than their pre-crisis levels. Covid-19 has gone well beyond these levels and is currently taking the aviation industry into uncharted territory. As of 24 March 2020, 98% of global passenger revenues were accounted for by air transport markets with severe restrictions (i.e., quarantine for arriving passengers, partial travel bans, and border closures), many airlines have been brought to a complete stop and, to make matters worse, the provisionally-observed recovery pattern for Covid-19 is turning out to be slower than the short-sharp V-shaped pattern observed in 2003. (Fig. 1 ). Open in a separate window Fig. 1 SARS vs Covid-19 outbreak available seat kilometres (ASKs) evolution in the Chinese domestic market.

Single till V. Dual till and the Paradox of Airport Competition

Airports’ regulatory till has been an issue of debate between airlines and airports for some time now. In 1most of the cases the type of till is set by legislation or it is part of concession agreements under which many airports operate now in Europe. As claimed by airlines and airlines associations the use of the single till, under which non aeronautical revenues are taken also into account when considering the level of airport charges, it rightfully reflects the indispensable link between aeronautical and nonaeronautical services provided at an airport, while the use of either the dual till concept where only aeronautical revenues are taken into account for setting airport charges or of the hybrid till mechanism under which only part of the non-aeronautical revenues are considered, is an evidence of lack of competition among airports and of misuse of their market power. Airports on the other hand indicate that the full costs of aeronautical charges and therefore the principle of cost relatedness is ensured under the dual till concept and the choice of regulatory till cannot be related to the competitiveness of the airport market or with abusive conduct. Recent evaluation assessments however carried out by the European Commission does not seem to accept as sufficient evidence of misuse of market power of airports the use of dual till, while airports have long before been subjected to the competition rules.

The joy of flying: Efficient airport PPP contracts

We derive the optimal concession contract for an airport where the concessionaire’s effort impacts either non-aeronautical revenue (shops, restaurants, parking lots and hotels) or aeronautical revenues (passenger and airline fees). Our first model assumes that demand for the infrastructure is exogenous whereas demand for non-aeronautical services depends both on passenger flow and on the concessionaire’s effort and diligence. We show that the optimal principal-agent contract separates exogenous and endogenous risks. First, the term of the concession varies inversely with passenger flow, so that the concessionaire bears no exogenous demand risk. Second, the concessionaire bears part or all of non-aeronautical risk, which fosters effort. We also study a model where the concessionaire’s effort affects demand for aeronautical services and focus on the case where the contract includes a demand trigger for investment as an incentive. Both optimal contracts can be implemented with a Present-Value-of-Revenue (PVR) auction in which firms bid on the present value of aeronautical revenue and the concession ends when the bid is collected. PVR auctions have been used to auction airport PPP contracts in Chile, and demand triggers for investment have been used both in Brazil and Chile.

The economic value of additional airport departure capacity

This article presents a model for the economic value of extra capacity at an airport. The model is based on a series of functional relationships linking the benefits of extra capacity and the associated costs. It takes into account the cost of delay for airlines and its indirect consequences on the airport, through the loss or gain of aeronautical and non-aeronautical revenues. The model is highly data-driven and to this end a number of data sources have been used. In particular, special care has been used to take into account the full distribution of delay at the airports rather than its average only. The results with the simple version of the model show the existence of a unique maximum for the operating profit of the airport in terms of capacity. The position of this maximum is clearly dependent on the airport and also has an interesting behaviour with the average number of passenger per aircraft at the airport and the predictability of the flight departure times. In addition, we also show that there exists an important trade-off between an increased predictability and the punctuality at the airport. Finally, it is shown that a more complex behavioural model for passengers can introduce several local maxima in the airport profit and thus drive the airport towards suboptimal decisions.

The Current Situation and Change in Airport Revenues: Research on The Europe’s Five Busiest Airports

With the globalization and the Airline Deregulation Act in 1978, there has been a great deal of change and development around the world in airports. Airport revenues and airport commercial activities are among the areas where this development is most felt. Over time, the airport operators went through changes in their commercial activities, with the increase in aeronautical revenues and non-aeronautical revenues, and at the same time proportional change was observed as well. In this study, based on official data, the structure of aeronautical revenues and non-aeronautical revenues belonging to five of Europe’s busiest airports in terms of number of passengers was evaluated by vertical percentage analysis and trend analysis method. In the scope of the study, the financial data of the selected five airport operators for the period between 2008 and 2015 were examined and it was aimed to determine the financial status of the airports and the change by years. Besides, the financial situation of the airports has been reviewed and some suggestions have been made.

Exploring the determinants for airport profitability: Traffic characteristics, low-cost carriers, seasonality and cost efficiency

Given the growing pressure on aeronautical revenues, the increasing focus on airports’ financial performance and the sharpened state aid guidelines in Europe, it is valuable to have detailed insight in the determinants for airport profitability. This paper fills in a gap in scientific research by presenting the most important traffic and financial determinants for airport profitability, since the majority of scientific literature on airport (financial) performance focuses on efficiency rather than on profitability. Comprehensive airport traffic and financial data for 125 airports in Europe, the United States (US), Canada, Australia and New Zealand for the period 2010–2016 have been used to estimate several fixed-effects panel data regression on profit margin. Among others, the results show evidence for the fact that an increasing share of transfer passengers affects an airport’s profit margin. In addition, there is no sign of a general LCC effect and just limited evidence for the fact that the market share of specific LCCs affect airport profitability: only an increase in the market share of Southwest Airlines at major airports leads to lower profit margins. Moreover, a quadratic relationship between seasonality and profitability has been identified. It points at the existence of a certain optimal seasonality score. Below that tipping point, a decrease in seasonality leads to higher profit margins. On the contrary, a further reduction of seasonality after the tipping point leads to lower profit margins. This might indicate that no or limited seasonality is a result of capacity constraints and, in turn, leads to increasing operating costs related to congestion. Regarding financial variables, the results especially show significant positive effects of capital cost efficiencies on profitability. Those effects are especially large for airports in the US and for small regional airports. Labour productivity only plays a important role in the profitability of US airports. Finally, the results show that regional O/D airports largely depend on regional economic development and population growth, while the major airports rather depend on global economic development than on an increase in local demand.

How to mix per-flight and per-passenger based airport charges: The oligopoly case

While airport aeronautical charges are traditionally aircraft-weight related, currently an increasing share of aeronautical airport revenues is derived from passenger related charges. This paper compares the optimal mix of per-passenger and per-flight based (cost recovering) airport charges from the carriers’ and the social viewpoints when carrier markets are oligopolistic. We show that positive per-passenger charges might be able to support the implementation of monopoly fares at slot-constrained airports. They can also mitigate strategic frequency reductions at uncongested airports, leading to an increase in both carrier profit and welfare relative to a charging scheme that fully relies on per-flight charges.

Performance and prospects of smaller UK regional airports

This paper investigates the traffic and financial performance of smaller UK regional airports between 2001 and 2014. Fourteen airports that typically serve less than 5 million passengers per annum were selected for the analysis. A period of strong growth in passenger demand was experienced from 2001 to 2007, driven largely by low cost carriers. The period from 2007 to 2014 was characterised by declining demand, resulting in significant losses for many of the airports. Airline strategies, such as the use of an increased unit fleet size and average sector length, may further limit future prospects for smaller UK regional airports in favour of larger ones with greater local demand. The relationship between traffic throughput and the generation of aeronautical revenues seems to vary at airports. There is generally a strong and significant relationship between traffic throughput and the generation of commercial revenues and total operating costs at airports serving 3–5 million passengers, but the situation for airports serving fewer than 3 million is less certain.

Case studies from New Zealand about the shifting nature of airport–airline relationships

Since 1985 New Zealand has been at the forefront of airport commercialisation. Airport companies have sought ways of developing both aeronautical and non-aeronautical revenues. Driven in part by the emergence of low-cost carriers (LCC), several larger regional airports which did not have international services saw their development as a real opportunity. From 1995, the number of international airports grew quickly from the long-established three to eight, with other airport companies actively seeking such services. These regional airports frequently put into place infrastructure developments to support and encourage international services. Typically provided to Australia and the Pacific Island nations, the number of international services initially grew quickly and then reached a seemingly stable level. Due in part to the volatile nature of LCCs, however, the long-term stability of these services was mixed and after around five years they began to decline rapidly and subsequently ended at three regional airports and were severely curtailed at a fourth. This paper utilises the experiences of New Zealand’s regional airports as case studies to explore the shifting nature of airport–airline relationships from the airports’ perspective. The author reflects on the possible lessons and overall ramifications, given the magnitude and long-term nature of airport infrastructure investments.

Is Mixing Airport Charges Collusive?

While airport aeronautical charges are traditionally aircraft weight related, currently an increasing share of aeronautical airport revenues is derived from passenger related charges. This paper compares the optimal mix of per-passenger and per-flight based (cost recovering) airport charges from the carriers' and the social viewpoints when carrier markets are oligopolistic. We show that positive per-passenger charges can implement collusive fares and reduce welfare at slot-constrained airports. But, an increase in the per-passenger based charges can mitigate strategic frequency choices at uncongested airports leading to an increase in both carrier profit and welfare.

INFLUENTIAL VARIABLES INDUCING AERONAUTICAL REVENUES AT REGIONAL AIRPORTS

Maximising revenues is one of the main objectives for regional airports to achieve in order to sustain their business, especially after the introduction of deregulation and privatisation of airports. Optimising aeronautical revenues has always been considered as a straightforward method and airport managers generally overlooked on the importance of daily operational factors that could influence the generation of aeronautical revenues. Thus, the objective of this paper is to validate whether the identified influential factors such as type of flight services offered, type of aircraft that airlines utilised, time of the day, day of the week the flights arrives or departs, and the number of passenger the airlines ferry in and out of the airport have an effect on the generation of aeronautical revenues. This study has adopted a quantitative approach using regression analysis to investigate the influence of these selected variables on the generation of aeronautical revenues. The findings indicate that the selected variables have positive and negative significant influence on the generation of aeronautical revenues at regional airports

What are the key considerations for an airport in implementing a direct channel for car park and ancillary pre-booking, and what are the potential resulting incremental revenue benefi ts?

In the last 10 years adverse market conditions, increased competition amongst airports, and pressure from low cost carriers to reduce their costs has meant for airports aeronautical revenues do not cover their associated costs. It is therefore clear non-aeronautical revenues, such as parking, critically determine the financial viability of an airport. However, non-aeronautical revenues are also under threat because off-site car parks are sprouting up adjacent to airports, undercutting airport prices. Moreover airlines and other resellers cross sell airport parking, grabbing a portion of airport revenue. Airports must therefore implement strategies to defend, increase and create new streams of non-aeronautical revenue. One area where airports can succeed in creating new and incremental nonaeronautical income is through directly selling car parking and ancillaries to passengers before they arrive at the airport. This paper reviews strategies that airports can implement in pre-book parking. It exemplifies how, with best of breed car parking and ancillary pre-booking software that allows yield management of pricing based on (i) demand for spaces (ii) time of arrival at the car park and (iii) how far in advance a booking is made, then significant incremental and new revenues can be achieved.

The importance of concession revenues in the privatization of airports

We investigate the tradeoff between the airport’s concession and aeronautical revenues—two complementary services. Increasing the frequency of flights may result with congestion which could stimulate demand for concessions, but may also harm the demand for flights. When passengers have a low valuation for the concession good, the opportunity for concession revenue is small and the airport focuses its revenue on the aeronautical (i.e., landing) fees. With a sufficiently large valuation for concession goods, the airport may lower the aeronautical charges to stimulate greater flight frequency in order to lower airfares thereby attracting more passengers ultimately to increase concessions revenues. It is in the latter case where we observe minimal loss of aeronautical welfare when airports are privatized. Thus, our research could help guide decision makers in the airport privatization process. Namely, we find that privatization is not recommended unless the potential for concession revenues is sufficiently large.

The influence of the operational environment on efficiency of international airports

SummaryHeterogeneity must be considered in the efficiency analysis of decision‐making units; otherwise, the results will be strongly biased. This is also valid for airport management where the operational environment heavily influences efficiency. In this paper, conditional efficiency measures are applied to airports to incorporate heterogeneity in non‐parametric frontier models which are robust for outlying observations. In particular, the influence of the operational environment on airport efficiency is examined in a sample of 141 international airports. The conclusions show that the operational environment indeed matters and that privatisation, regulation, traffic transfer and the dominant carrier have a positive effect on efficiency, whereas aeronautical revenues influence it negatively. Copyright © 2014 John Wiley & Sons, Ltd.

How important are commercial revenues to today's airports?

This paper investigates the importance of commercial revenues to today's airports. It establishes that on average commercial revenues now account for about half of all revenues, although this varies considerably by region and individual airport, with retail being the most significant commercial source. It explores some of the key factors, such as consumer trends, security developments and political changes, which have led to a much more challenging time for commercial managers since the late-1990s. With growing pressure to control levels of aeronautical revenues, even greater focus on commercial revenues may be needed in the future and the paper concludes by discussing the implications of this.